Earnings Preview: Caterpillar

PEORIA, Ill. (AP) -- Caterpillar Inc. reports second-quarter results on Wednesday, and investors will be watching to see how much the slowdown in commodities and, potentially, construction is hurting the company's sales of equipment for those industries.

WHAT TO WATCH FOR: In 2012, three industries — construction, mining, and engines and generators — each contributed about one-third of Caterpillar's revenue. In the fourth quarter construction revenue fell 25 percent, while mining was still growing.

But the global mining industry is slowing now. Prices for copper, aluminum, and gold have all fallen sharply this year. A new Citi survey of spending plans by mining and construction companies shows a decline in expected spending on mining equipment. The survey shows an expected 16 percent decline in 2013 spending compared to last year. The weakness is notable across all types of equipment and all types of commodities, Citi wrote. Its outlook for prices of mining gear "has deteriorated considerably" from its first-quarter survey, Citi wrote. Mining companies are turning away from growth and re-focusing on costs and returns. "We believe the consequence will likely be a multi-year decline in capital spending," the Citi report said.

Meanwhile Citi's survey also shows a continuing decline in expected construction spending — down 8.1 percent over the next 12 months. Pricing is expected to decline by 3 percent.

WHY IT MATTERS: Investors know that Caterpillar's business will tend to follow the economy's ups and downs. But it's facing slowdowns in industries — like mining — and places — like China — that were expected to be strong growth drivers. The slowdowns led to a smaller first-quarter profit at Caterpillar, and prompted it to reduce its full-year profit and revenue guidance. Caterpillar has also cut thousands of jobs in the past year.

WHAT'S EXPECTED: Analysts surveyed by FactSet expect a profit of $1.69 per share on revenue of $15.09 billion.

LAST YEAR'S QUARTER: Net income of $1.7 billion, or $2.54 per share. Revenue was $17.37 billion.